"SIG Barofsky outlined the depletion of needed funds that failed loan
modifications cause to already troubled families. With a rate of
100,000 bank repossessions a month, Barofsky notes, the stakes are high
and the public harm is significant."

The Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Neil Barofsky just released his latest Quarterly report on TARP.
He begins by asking the question, who has benefited from the TARP
program? He makes a strong case that Wall Street is the main
beneficiary, while Main Street has suffered under deteriorating
conditions for commercial credit, home ownership, and employment
conditions. (Image)

"By fulfilling the goal of avoiding a financial collapse
there is no question that the dramatic steps " were a success for Wall
Street. " Main Street ...reaped significant benefit from the
prevention of a complete collapse of the financial industry. "Main
Street has largely suffered alone, however, in these areas in which TARP
has fallen short of its other goals." (p. 5)

The report notes that TARP failed to successfully address these program goals:

2) Unemployment is up by 3 points to nearly 10% since the TARP program began

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3) Poverty has gone from 13.2% at the start of TARP to 14.3% through 2009

Barofsky notes that while TARP was failing to address these concerns,
big bonuses returned to the very banking institutions whose actions
created the need for TARP in the first place.

Of note, SIGTARP takes on the "moral hazard" question. It's noted
that the majority of resources and benefits from TARP are concentrated
on the financial sector, at the expense of Main Street. The "legacy" of
TARP is the failure to benefit Main Street in any discernable way,
while, at the same time, there has been "concentration" of financial
institutions. An unstated but obvious conclusion is that
too-big-to-fail financial institutions are still looming as potential
failures that could collapse the entire financial system.

The report expands from the "moral hazard" question to the "potential
harm to the Government's credibility that has attended this program."
Barofsky mentioned this in previous reports and he returns to it with
real force.

"When treasury refuses for more than a year to require TARP
recipients to account for the use of TARP funds or claims that Capital
Purchase Program participants were "healthy viable" institutions,
knowing full well that some are not, or when it provides hundreds of
billions of dollars in TARP assistance to institutions and then relies
on those same institutions to self-report any violations of their
obligations to TARP, it damages the public's trust to a degree that is
difficult to repair." (p.6)

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The report goes on to lodge serious questions about the way Treasury
handled the AIG bailout and questions the current valuation methodology
for AIG and other firms acquired and serviced by the public since 2008.

Barofsky challenges Treasury on its valuation methodology and noted
that it may seriously skew the supposed paybacks to the treasury claimed
by the program. Despite a request that Treasury correct and explain
its methodology, it has refused to do so.